TDS u/s194Q on gross goods purchases for commission agent, despite booking only commission income; full credit allowed

TDS credit was denied on the ground that Form 26AS reflected TDS deducted under s. 194Q on the gross value of goods, whereas the assessee, a commission agent, recorded only commission income in its books. The Tribunal held that s. 194Q merely imposes a withholding obligation on specified buyers and does not determine the recipient's taxable income; gross purchase value reflected in Form 26AS need not constitute the assessee's real income where sale proceeds are passed on to principals and only commission is offered to tax. As there was no finding that Form 26AS transactions were outside the books for the year, denial of full TDS credit was unjustified. The AO was directed to grant full TDS credit after verification; appeal allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, on the facts found, the assessee was entitled to full credit of TDS appearing in Form 26AS even though the assessee offered only commission income (and not the gross value of goods sold) in its return for the relevant year.

(ii) Whether restriction of TDS credit by applying Rule 37BA/"Rule 37B" was legally sustainable where there was no finding that the corresponding receipts/income were assessable in different years or that the related transactions were not recorded in the assessee's books for the year.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii) (grouped): Entitlement to full TDS credit reflected in Form 26AS despite commission-agent accounting

Legal framework (as discussed by the Court): The Court considered that Section 194Q merely creates an obligation on specified buyers to deduct TDS on high-value purchases and does not, by itself, determine the taxability or "real income" in the recipient's hands. The Court also examined the applicability of Rule 37BA in the context of the denial/restriction of TDS credit.

Interpretation and reasoning: The Court found that the assessee acted as a commission agent for sale of agricultural produce on behalf of farmers and, as per normal accounting practice for such an arrangement, recorded only commission as income because the assessee was not the owner of the goods. Consequently, gross sale proceeds routed through the assessee would not necessarily correspond to the assessee's own "real income." The Court emphasized that deduction of TDS under Section 194Q by purchasers does not convert the gross turnover into taxable income of the assessee.

The Court held that denial of full TDS credit was unjustified because: (a) TDS had been deducted in the assessee's name and was reflected in Form 26AS; (b) there was no case set up that the assessee concealed gross sales/turnover or that the transactions reflected in Form 26AS did not form part of the assessee's books for the year; and (c) Rule 37BA had no application since it was not a situation where income from the transactions was to be offered across multiple years, and there was no dispute that the transactions were accounted for in the relevant year.

Conclusions: The Court conclusively held that, in the absence of any allegation or finding that Form 26AS transactions were not recorded in the assessee's books for the year or were taxable in multiple years, full TDS credit could not be denied. The assessing authority was directed to allow full TDS credit as available in Form 26AS.

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